VIENNA, AUSTRIA / RankWire.AI / – Following weaker economic activity during the initial half of the year, Austria’s central bank has lowered its forecast for 2026 economic growth. The Oesterreichische Nationalbank now anticipates the real gross domestic product will increase by 0.5% this year, down from its June projection of 0.6%. The bank explained that the 0.1 percentage point reduction reflects weaker economic performance than previously reported during the first six months of 2026.
According to Statistics Austria, Austria’s economy shrank by 0.1% in the second quarter compared to the previous three months. This decline followed six quarters of consecutive positive growth, although GDP was still 0.4% higher than a year earlier. In comparison, the first quarter saw an annual growth rate of 0.8%. Statistics Austria attributed the second quarter’s slowdown to rising energy prices, which added pressure to an economy that had recently exited recession.
Despite the full-year downgrade, the OeNB remains optimistic about the second half of 2026. Its short-term indicator suggests GDP will grow by 0.1% in the third quarter and 0.3% in the fourth. The bank noted that global trade has outperformed previous expectations, and Austrian exports of goods have gained momentum. Since its June forecast, industrial order books and business sentiment have shown signs of improvement, contributing to a more positive outlook.
2027 Growth Forecast Elevated Due to Improved Conditions
The improved outlook for the latter half of 2026 has led the central bank to raise its 2027 growth forecast. The OeNB now predicts a 1.3% increase in economic activity next year, compared to its June estimate of 1.1%. The projection for 2028 remains unchanged at 1.2%. Austria’s economy grew by 0.7% in 2025 after two years of recession, but the recovery has remained tepid amid higher energy prices and challenging international circumstances.
The bank also factored in the economic impact of Austria’s summer drought in its latest assessment. It estimates that the drought will reduce economic growth by approximately 0.1 percentage point in 2026. OeNB Governor Martin Kocher mentioned that, despite difficult conditions, industrial orders and sentiment have improved since June. The bank noted that these developments, along with stronger global trade, have contributed to the improved outlook for the second half of 2026 and the upward revision for 2027.
Inflation Expectations Lowered for 2026
The OeNB has also adjusted downward its inflation forecast for Austria. It now expects Harmonised Index of Consumer Prices inflation to average 3.0% in 2026, below its June estimate of 3.2%. For 2027, inflation is projected at 2.3%, and 2.2% in 2028. The June outlook had indicated rates of 2.4% for 2027 and 2.1% for 2028. These latest figures suggest inflation will decline after energy costs elevated prices throughout 2026.
The September forecast projects modest growth for Austria this year, with a quicker expansion anticipated in 2027. The 2026 growth estimate of 0.5% aligns with the forecast made by the central bank in March. The June revision had increased this estimate to 0.6%, but weaker first-half data led to the recent downward adjustment. The OeNB’s updated projections now span 2026 through 2028, reflecting recent economic data, international conditions, and its latest short-term outlook.